16. The trial balance, errors and suspense accounts Flashcards
1
Q
What is a trial balance?
A
A summarised list of all the individual ledger account balances
2
Q
What are the steps in preparing financial statements in regards to the trial balance? (5)
A
- Transactions recorded in ledger accounts
- Ledger account balanced and closed off
- Trial balance extracted
- Year end adjustments made and ledger accounts closed off.
- Trial balance used to prepare financial statements.
3
Q
What are the errors where the trial balance still balances? Explain them. (6)
A
- Error of omission: completely left out.
- Error of commission: posted to wrong ledger account.
- Error or principle: conceptually recorded incorrectly.
- Error of original entry: wrong amount recorded.
- Compensating error: multiple errors that cancel each other out.
- Reversal of entries: posted the wrong way round.
4
Q
What are the errors where the trial balance will not balance? (5)
A
- Single sided entry
- Two postings one side
- Dr an Cr entries at different values
- Opening balances have not been brought forward
- Extraction error within the TB.
5
Q
When is a suspense account used?
A
When an accountant is unsure on where to post something
